Seven points, why Input Tax credit availed in one state cannot be utilized for payment of CGST/SGST/IGST liability of other state of the registered person under same PAN.

The different view has comes and also there is huge confusion about the utilization of Input tax credit, outside the state. The act has not clearly provide about that whether credit availed in one state can be utilized against the liability in other state of the registered person under same PAN.

Sec 49(5) of CGST Act, provide the manner of utilization of credit

“The amount of input tax credit available in the electronic credit ledger of the registered person on account of–

(a) integrated tax shall first be utilized towards payment of integrated tax and the amount remaining, if any, may be utilized towards the payment of central tax and State tax, or as the case may be, Union territory tax, in that order;

(b) the central tax shall first be utilized towards payment of central tax and the amount remaining, if any, may be utilized towards the payment of integrated tax;

(c) the State tax shall first be utilized towards payment of State tax and the amount remaining, if any, may be utilized towards payment of integrated tax;

(d) the Union territory tax shall first be utilized towards payment of Union territory tax and the amount remaining, if any, may be utilized towards payment of integrated tax;

(e) the central tax shall not be utilized towards payment of State tax or Union territory tax; and

(f) the State tax or Union territory tax shall not be utilized towards payment of central tax.”

The reasons why credit cannot be utilized outside the state.

1. Sec 16 of CGST Act, provide for Eligibility and conditions for taking input tax credit;

(a)no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless, he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed.

 (b) he has received the goods or services or both

There is no document prescribed that facilitate to transfer and booking of credit without receiving of goods/ service or both and invoice.

2. Sec 20 of CGST Act, Provide that ISD cannot distribute the credit of one state to other state. ISD has to distribute the credit to the state where the inputs has used for supply of goods or service or both.

3. Sec 51 of CGST Act, Provide that no deduction of TDS shall be made if the location of the supplier and the place of supply is in a State or Union territory which is different from the State or as the case may be, Union territory of registration of the recipient.

4. The one state cannot allowed to set-off tax liability from the input tax credit of other state, this will reduce the revenue of that state.

5. That for utilization of Input Tax credit of one state, Input tax credit has to be transfer to other state, but there is no provision has found in CGST and IGST Act, which allow the transfer of credit to other registered person having registration in different state under same PAN.

6. GST Scheme is registration specific, registration has to be take in every state from where he has made supply of goods/ service or both and also has to file return on the basis of registration in every state.

7. Sec 24 of CGST Act. Provide that the person having different registration under Same PAN to be treated as distinct person under CGST Act.

Conclusion: From the reading of sec 49(5) with the other provision mention above, it is clear that the GST scheme is state and registration specific, therefore input tax credit of one state cannot utilised for payment of liability of other state.  GST department also give clarification on twitter –Tax Credit Pool is separately maintained for each registered person. No cross utilization between distinct person.

(CA Amit kumar-  caamitdhama@gmail.com –  Ph-9717129429)

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6 responses to “In GST Input Tax Credit of One state cannot be utilised for payment of GST Tax liability in other state under same PAN”

  1. caamitkumar says:

    ISD can distribute credit of the state where ISD is registered.
    But he distribute the credit to same state where service is used.He cannot distribute credit related to one state to other .

  2. Pawan says:

    Section 20 does not restrict the credit to be transfered to another state

  3. Pawan says:

    Its a challange

    An adveertising agency takes space in various states and since the space is in another state CGST and SGST of another state shall be applicable (which constitutes 70% of the advertisement cost) – this means advertisement cost for these agencies are going to go up by 14-15%. Also the challange if these agencies have to raise the invoice as per the location of the immovable property or location of the recipient?

  4. caamitkumar says:

    In case of service you have to take reg. When place of supply is outside the state and u want to take the benifit of tax credit of that state.

  5. Alok Ranjan says:

    why we need for service provider to get registration in each state where he provide services.

  6. Akash says:

    Very Informative !!

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